Traditional tour ops in 'terminal decline'

Operators need to radically change their business to survive in 2012 claims accountant KPMG.

The company says that traditional high-volume tour operating is in terminal decline as most UK consumers are booking flights and holidays online.

With 24 operator failures in 2011, KPMG says 2012 could be one of the most challenging yet with low-cost flights, online bookings, economic downturn and fuel and tax price increases.

And according to the Red Flag Alert Report, tour operators facing ‘critical distress’ is estimated to have risen by 49% in the last year.

Richard Hathaway, KPMG's head of travel, leisure and tourism said: "The traditional high-volume tour operating model based on customers pre-booking flights and accommodation packages well in advance is in long term decline as more and more travellers opt for self-packaging online and niche solutions.

“While some traditional tour operators have introduced change and flexibility, or are in the process of doing so, others will face financial discomfort and those with weak balance sheets and poor forward sales will be hit hardest.

“After a long period of year on year increases, the total number of overseas holidays taken
by UK travellers has seen a 20% decline between 2008 and 2010.”

Another recent global KPMG report revealed that 74% of consumers in the UK are now more likely to buy flights and vacations online, compared to 61% in the rest of Europe.

KPMG says operators need to adapt and advises the following steps:

* Ensure a spread of strong brands in high margin spaces
* Invest in a strong online and mobile channel
* Offer products which are dynamic and adaptable
* Put a significant focus on cost reduction and cash management
* Take steps to ensure a healthy and lowly geared balance sheet